TIOL-DDT 2707 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3"><s><strong><font size="2"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3"><s><strong><font size="2"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=23157"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2015_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="300" height="148" hspace="5" border="0" align="right" ></a></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></strong></font><font color="#663399" size="3">TIOL-DDT 2707</font><br> 19 10 2015<br> Monday</strong></font></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Assessment of imported second hand machinery - CBEC guidelines </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> had issued instructions on valuation of second hand machinery in circular no. <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=NTk5OA==" target="_blank"><strong> 4/2008 - Cus </strong></a> dated 12th February 2008. <strong>(<a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=NjgzMw==" target="_blank">DDT 806 - 18.02.2008</a>)</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board has issued fresh guidelines for valuation of imports of second hand machinery: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. All imports of second hand machinery/used capital goods shall be ordinarily accompanied by an inspection/appraisement report issued by an overseas chartered engineer or equivalent, prepared upon examination of the goods at the place of sale. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The report of the chartered engineer or equivalent should be as per the Form A. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. In the event of the importer failing to procure an overseas report of inspection / appraisement of the goods, he may have the goods inspected by any one of the agencies in India, as are notified by the DGFT; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. At customs stations where agencies notified by DGFT are not present, importers may continue to avail of the services of locally empaneled chartered engineers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. In cases where the report is to be prepared by the agencies in India notified by DGFT or the chartered engineers empaneled by Custom Houses, the same shall be in the Form B. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. The value declared by the importer shall be examined with respect to the report of the chartered engineer Similarly, the declared value shall be examined with respect to the depreciated value of the goods determined in terms of the <em>circular No. 493/124/86-Cus VI dated 19/11/1987 and dated 4/1/1988</em>. If such comparison does not create any doubt regarding the declared value of the goods, the same may be appraised under rule 3 of the CVR, 2007. If there are significant differences arising from such comparison, Rule 12 of the CVR, 2007 requires that the proper officer shall seek an explanation from the importer justifying the declared value. The proper officer may then evaluate the evidence put forth by the importer and after giving due consideration to factors such as depreciation, refurbishment or reconditioning (if any), and condition of the goods, determine whether the declared transaction value conforms to Rule 3 of CVR, 2007. Otherwise, the proper officer may proceed to determine the value of the goods, sequentially, in terms of rule 4 to 9. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The 2008 Circular is superseded. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTg2NTY=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 25/2015 in F.No.467/34/2006-CUS.V., Dated October 15, 2015 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Income Tax - Revised and Updated Guidance for Implementation of Transfer Pricing Provisions </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>provisions relating to transfer pricing are contained in Sections 92 to 92F of the Income-tax Act. These provisions came into force from Assessment Year 2002-2003 and have seen a number of amendments over the years, including the insertion of Safe Harbour and Advance Pricing Agreement provisions and the extension of the applicability of transfer pricing provisions to Specified Domestic Transactions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of the provisions, any income arising from an international transaction or specified domestic transaction between two or more associated enterprises shall be computed having regard to the Arm's Length Price (ALP). <strong> <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=NzM2" target="_blank">Instruction No. 3</a></strong><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=NzM2"> </a> was issued on 20th May, 2003 to provide guidance to the Transfer Pricing Officers and the Assessing Officers to operationalise the transfer pricing provisions and to have procedural uniformity. Due to a number of legislative, procedural and structural changes carried out over the last few years, <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=NzM2" target="_blank"><strong>Instruction No. 3</strong> </a> of 2003 is replaced with new Instruction to provide updated and adequate guidance on the transfer pricing provisions pertaining to international transactions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F8A061">Reference to Transfer Pricing Officer (TPO): </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since transfer pricing cases are now being selected for scrutiny on the basis of risk parameters, there is no requirement of selecting a transfer pricing case for scrutiny on the basis of the value of the international transaction. Consequently, there would be no requirement of referring an international transaction to the TPO for determination of its ALP merely because the value of the international transaction is above a particular limit. In particular, where a case has been selected for scrutiny only on non-TP issues and the case also involves international transactions with AEs, the case shall not be referred to the TPO irrespective of the value of the international transaction or aggregate value of all international transactions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F8A061">Role of Transfer Pricing Officer: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The role of the TPO begins after a reference is received from the AO. In terms of Section 92CA of the Act, this role is limited to the determination of the ALP in relation to international transaction(s) referred to him by the AO. However, if any other international transaction comes to the notice of the TPO during the course of the proceedings before him, then he is empowered to determine the ALP of such other international transactions also by virtue of sub-sections (2A) and (2B) of Section 92CA of the Act. The transfer price has to be determined by the TPO in terms of Section 92C of the Act. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F8A061">Role of the AO after Determination of ALP: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under sub-section (4) of Section 92C of the Act, the AO has to compute the total income of the assessee having regard to the ALP determined by him under sub-section (3) of the same Section. Where the determination of ALP is done by the TPO under sub-section (3) of Section 92CA of the Act, the AO has to compute the total income of the assessee under sub-section (4) of Section 92C (read with sub-section (4) of Section 92CA) in conformity with the ALP so determined by the TPO. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F8A061">Maintenance of Data Base: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is to be ensured by the CIT (Transfer Pricing) that the references received from the AOs by the TPOs in his jurisdiction are dealt with expeditiously and accurate record of all events connected with the whole process of determination of ALP is maintained. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F8A061">Applicability: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The above guidance is applicable only to transfer pricing provisions in respect of international transactions. Similar guidance in respect of transfer pricing provisions pertaining to specified domestic transactions are under consideration of the CBDT. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Instruction No. 3 of 2003 is superseded with immediate effect. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTg2NTU=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Instruction No. 15/2015., Dated October 16, 2015 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">The NJAC Judgement - An Alternative View - Arun Jaitley </font></em></strong></font></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#8A008A">Supreme Court - Final, not Infallible</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Finance Minister Arun Jaitley has commented on the latest Supreme Court judgement in the National Judicial Appointments Commission case on his facebook page: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#F3DBCF">The key rationale behind the majority opinion appears to be that independence of judiciary is an essential ingredient of the basic structure of the Constitution. This is unquestionably a correct proposition. Having stated this, the majority transgresses into an erroneous logic. It argues that the presence of a Law Minister in the Commission and the appointment of two eminent persons in the Commission by a group, which will, besides Chief Justice of India, comprise of the Prime Minister and the Leader of the Opposition, will constitute political involvement in the judicial appointments. Judges appointed on this basis may feel gratified to the politicians. Political persons would be obviously guided by their political interest. The Judges warn of "adverse” consequences if politicians were a part of the appointment process. Hence protection of the judiciary from political persons was essential. This is key reason on which constitution amendment, unanimously passed by both the Houses of Parliament and the State Legislature, has been struck down. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#D7D7EA">Politician bashing is the key to the judgement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#F3DBCF">The judgement ignores the larger constitutional structure of India. Unquestionably independence of the judiciary is a part of the basic structure of the Constitution. It needs to be preserved. But the judgement ignores the fact that there are several other features of the Constitution which comprise the basic structure. The most important basic structure of the Indian Constitution is Parliamentary democracy. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#D7D7EA">The next important basic structure of the Indian Constitution is an elected Government which represents the will of the sovereign. The Prime Minister in Parliamentary democracy is the most important accountable institution. The Leader of the Opposition is an essential aspect of that basic structure representing the alternative voice in Parliament. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#F3DBCF">As someone who has spent more years in court than in Parliament, I feel constrained to speak out for Indian democracy. There is no principle in democracy anywhere in the world that institutions of democracy are to be saved from the elected. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#D7D7EA">Having struck down the 99th Constitutional Amendment, the Court decided to re-legislate. The court quashed the 99th Constitutional Amendment. The court is entitled to do so. While quashing the same, it re-legislated the repealed provisions of Article 124 and 217 which only the legislature can do. This is the third error in the judgement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#F3DBCF">As someone who is equally concerned about the independence of judiciary and the sovereignty of India's Parliament, I believe that the two can and must co-exist. Independence of the judiciary is an important basic structure of the Constitution. To strengthen it, one does not have to weaken Parliamentary sovereignty which is not only an essential basic structure but is the soul of our democracy. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#D7D7EA">The Supreme Court opinion is final. It is not infallible. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM has added a disclaimer: <em>The views expressed are personal. </em></font></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Tweeting Judge?</font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Supreme Court judgement mentioned about three judges as submitted by the Attorney General. The Judgement in para 100 says: </font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the Judges appointed to this Court, according to him, was a non-performer as he had authored just a few judgments as a Judge of the High Courts of Delhi and Kerala, and far lesser judgments as the Chief Justice of the Uttarakhand and Karnataka High Courts, and less than ten judgments during his entire tenure as a Judge of the Supreme Court. The second Judge, according to him, was notoriously late in commencing Court proceeding, a habit which had persisted with the said Judge even as a Judge of the Patna and Rajasthan High Courts, and thereafter, as the Chief Justice of the Jharkhand High Court, and also as a Judge of the Supreme Court. The third Judge, according to the learned Attorney General, was notoriously described as a tweeting Judge, because of his habit of tweeting his views, after he had retired. Learned counsel for the respondents, acknowledged having understood the identity of the Judges from their above description by the learned Attorney General, and also affirmed the factual position asserted in respect of the Judges mentioned . </font></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But what's wrong with tweeting by a retired judge? The judgement in para 191 says, "<em>it has not been possible for us to comprehend, how and why, a Judge who commenced to tweet his views after his retirement, can be considered to be unworthy of elevation. The fact that the concerned Judge started tweeting his views after his retirement, is not in dispute</em>."</font></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Supreme Court Round Up - recent cases </font></em></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img width="168" height="121" src="Copy%20of%20http://www.taxindiaonline.com/RC2/image/stories/inside_ddt.jpg" alt="SC.jpg"></font></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#8A008A">Central Excise - appeals - a total mindless exercise on the part of the Revenue in filing such an appeal which is misuse and abuse of the process of law: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, the Supreme Court had affirmed the order of the CESTAT in favour of the assessee. The Department not only accepted this view but also issued a Circular in 2001 to that effect. In 2006, the Department filed an appeal with the Supreme Court on the same issue. The Supreme Court observed that<em> it was a total mindless exercise on the part of the Revenue in filing such an appeal which is misuse and abuse of the process of law</em>. But who pays for this mindless abuse? The citizen and the assessee. The officers who decided to file this appeal must have got a couple of promotions and the lawyers on both sides must have got decent fees. </font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> Commissioner of Central Excise, Mumbai-III Vs RDC Concrete (India) Ltd - <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTA3NjU2" target="_blank">2015-TIOL-245-SC-CX</a></strong>. </font></em></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#8A008A">Central Excise - EOUs - Exemption for Goods manufactured with indigenous raw materials - Catalysts are not raw materials: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Goods cleared to DTA by EOUs are allowed a concessional rate if the if the goods are produced or manufactured only from the raw material produced or manufactured in India. In this case, the assessee had used an imported catalyst and the Supreme Court held that catalysts are not raw materials. </font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> Commissioner of Central Excise, Belapur Vs IG Petrochemical Ltd -<strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTA3NjU4" target="_blank">2015-TIOL-246-SC-CX</a></strong>. </font></em></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#8A008A">Central Excise - Condition of exemption notification that duty has to be paid in <u>cash/PLA not fulfilled - Benefit of exemption denied</u>: Exemption Notification - Benefit of doubt should be in favour of Department: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Supreme Court held that it is trite that exemption notifications are to be construed strictly and even if there is any doubt same is to be given in favour of the Department</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong><em> Commissioner of Central Excise, Pondichery Vs Honda Seil Products Ltd - </em><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTA3NjYw" target="_blank"><strong>2015-TIOL-247-SC-CX</strong></a>.</font></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#8A008A">Central Excise - Valuation - additional consideration not to be added?: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At the time of clearance the duty was paid on the price charged. Some additional amount is received thereafter, on account of price escalation. However, it is not coming on record as to under what circumstances such price escalation was given. No such case was set up by the Revenue that the price was understated or depressed at the time of clearance of the goods and the additional amount was received subsequently, by a suspicious kind of arrangement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> <em>Commissioner of Central Excise, Delhi-III Vs Hitkari Fibres Ltd - </em><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTA3NjU5" target="_blank"><strong>2015-TIOL-248-SC-CX</strong></a></font></font><em><strong>.</strong></em></font></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#8A008A">Central Excise - Classification - end use of the said product at the hands of the purchaser cannot be the consideration for classifying the goods: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Insofar as the assessee is concerned, it is undertaking the work of printing alone and is supplying to those who place orders in this behalf. The end use of the product at the hands of the purchaser is not the concern of the assessee and cannot be the consideration for classifying the goods in question. It is the respondent which is to be assessed under the Central Excise Act and it has to pay the excise duty on the manufacturing process undertaken by it. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> <em>Commissioner of Central Excise Vs Gopsons Papers Ltd </em>- <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTA3NjU1"><strong>2015-TIOL-243-SC-CX</strong></a>. </font></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#8A008A">Central Excise - Classification - Limitation: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By no stretch of imagination, the appellant can be treated as a person who had misled the authorities or made any mis-statement / mis-declaration. The appeal is allowed on this ground itself without going into the issue of classification.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> <em>Caprihans India Ltd Vs Commissioner of Central Excise, Surat - </em><strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTA3NjU3" target="_blank">2015-TIOL-244-SC-CX</a></strong><em>. </em></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p> <p align="justify"><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@tiol.in" target="_blank"><strong>vijaywrite@tiol.in </strong></a></font></p> </body> </html>